N.H. beer-tax plan leaves bad taste

Hike would fund alcohol programs; grocers fear losing customers

PELHAM -- A six-pack of Shipyard beer at Tedeschi Food Shops in Dracut costs $8.99. Just a mile up the road, at Ray's Stateline Market in Pelham, N.H., the same six-pack goes for $7.49.

Some warn this price advantage New Hampshire grocers enjoy could be wiped out if a proposed 33 percent increase in the wholesale beer tax is approved.

"I would be against any tax increase," said Paul Marchand, who owns Ray's, where on any given day at least half the cars sitting in the parking lot sport Massachusetts license plates.

Reps. Charles Weed, D-Keene, and Richard Eaton, D-Greenville, have filed a bill that would hike the tax from 30 to 40 cents per gallon. The move would raise an estimated $4.3 million for prevention and treatment of alcohol abuse.

John Dumais, president of the New Hampshire Grocers Association, said Granite State grocers get about 60 percent of their business from neighboring states.

"Those 60 percent come to New Hampshire because we have a good story to tell -- low prices, no bottle bill," said Dumais. "Everything we have is a good deal. If you start raising the prices, there is less reason for them to come."

Besides scaring package-store owners, the tax increase could also threaten New Hampshire's emerging micro-craft brewery industry. Small breweries like Smuttynose and Redhook in Portsmouth are attracting tourism and new residents to the Granite State, according to Scott Schaier, a lobbyist for the beer-wholesalers trade association.

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Schaier said a tax hike could prompt customers to abandon craft beers for cheaper brands.

"Small craft brewers don't have the efficiency. They don't have the volume for buying glass and packaging materials, so they're not as well protected against price increases," Schaier said.

The beer tax is 10.6 cents per gallon in Massachusetts, 35 cents in Maine, 26.5 cents in Vermont and 24 cents in Connecticut.

New Hampshire is the only one of these states that does not have a bottle tax. For instance, customers pay a deposit on each bottle of beer that ranges from 5 cents in Massachusetts and Connecticut to 15 cents in Maine and Vermont.

Weed, one of the beer tax's sponsors, told the New Hampshire Union Leader that it is "irresponsible" for the state to rely on excise taxes when it could instead raise taxes on products that cause health problems, such as beer.

"Government serves a necessary service that isn't provided by the private sector," Weed said. "Revenue-starved government is not capable of doing what needs to be done."

How much would the price of beer increase by if the bill were signed into law?

A 24-pack of beer consists of 2.25 gallons, meaning the proposed tax would increase the price of a case of beer by about 23 cents. While Schaier said this may not sound like much, he said it could have a significant economic impact if just a small percentage of beer fans change their drinking habits.

New Hampshire has the second-highest per-capita beer consumption in the country, according to a 2012 report by the Beer Institute, a lobbying group. While beer consumption in New Hampshire fell 1.8 percent between 2003 and 2011, it declined 7.5 percent nationally.

Nearly 66 percent of New Hampshire residents had a drink in a 30-day period in 2011, second only to Wisconsin, according to the report.

Massachusetts, meanwhile, has taken steps in recent years to lower the cost of beer.

In 2010, voters passed a law that gave them cheaper beer by eliminating the state's 6.25 percent sales tax on alcohol Massachusetts lawmakers had increased the tax the year before, as a way to address significant budget shortfalls.

While New Hampshire businesses fret over the proposed tax, Massachusetts business leaders said it could convince shoppers who frequent stores in New Hampshire to keep their dollars in the Bay State.

"Anything that can be done to keep Massachusetts shoppers here is a good thing," said Bill Rennie, vice president of the Massachusetts Retailers Association.

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